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With dueling Republican and Democratic plans pending in the Senate on how to prevent student loan interest rates from doubling, Massachusetts Republican Senator Scott Brown and Democratic challenger Elizabeth Warren both say Congress must act to freeze the interest rates. But, like their parties, they disagree on how to pay for the freeze.

If Congress does not act, the 3.4 percent interest rate for subsidized Stafford loans could double this July. Both Democrats and Republicans have said they want they want to freeze the interest rate for another year, which would cost an estimated $6 billion.
Democrats, led by Senate Majority Leader Harry Reid of Nevada, want to increase the amount of Social Security and Medicare payroll taxes collected from owners of some private corporations. Republicans would take money from a prevention and public health fund established by President Obama’s health care reform law. President Obama has said he supports the Democratic plan, but would veto the Republican one.

A version of the Republican plan already passed the Republican-led House, and a similar bill was introduced in the Senate. The Senate is expected to vote Tuesday on the Democratic plan.

Brown has proposed his own plan that would freeze the interest rates at 3.4 percent for one year. In a separate bill, he would also require colleges to post more financial data online – including their 990 tax forms, with information including salary and benefits for department heads, administrators and other highly paid employees.

Brown would pay for the interest rate freeze by curbing improper payments made by the government. According to Brown’s office, the Office of Management and Budget estimates that there were $115 billion in improper payments made in fiscal year 2011, including payments sent to the wrong person, payments made in the wrong amount, or payments made without correct documentation.

Brown has portrayed his plan as a compromise between the Democratic and Republican versions, with a less controversial mechanism to pay for the interest rate freeze. But his office has said he would support the Republican plan, if it comes up for a vote. Brown would not support the Democratic plan because it involves raising taxes.

Warren, in an op-ed published Monday on the progressive Blue Mass Group website, also called on Congress to freeze the rate. She noted that the proposed increase could cost the average student borrower more than $1,000 over the life of the loan, and that the rising cost of education is “swamping more and more families.”

“Investments in education cost money, and where we spend our money reflects our deepest priorities as a country,” Warren wrote. “In the past few weeks, Congress voted to protect subsidies for oil companies and special tax breaks for billionaires. That money could have been invested in our public colleges and universities, in advanced technical training programs, or in stronger grant programs.”

Warren opposes the Republican plan to take money from the preventive health care fund. But she has not committed to supporting Reid’s plan, either. Asked whether Warren supports the Democratic plan, Warren spokeswoman Alethea Harney said, "Elizabeth believes Congress must act to stop student loan interest rates from doubling. She believes there are many options to pay for this including ending tax breaks for big oil companies, enacting the Buffett Rule, or ending tax breaks for hedge fund managers."